King v Burwell, the lawsuit challenging the legality of subsidies for marketplace insurance premiums, was decided on June 25th by a 6-3 vote in the Supreme Court of the United States (SCOTUS), favoring the full intention of the law rather than the literal interpretation of the sentence in question.
The Supreme Court’s majority opinion stated that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 26B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.” The opposing opinion, however, called the decision “pure applesauce” and “jiggery-pokery.”
Whether you’re an individual with marketplace coverage or an employer, the outcome of King v Burwell affected you.
Insurance consumers in states with federally run marketplaces would have had to face some hard financial realities if the decision in King v Burwell struck down federal subsidies. Suddenly having to pay unsubsidized health insurance premiums would have meant unaffordable coverage for millions and likely would have resulted in dropped coverage, which would have had enormous impact on the very essence of the Affordable Care Act.
Presently, consumers with subsidies are paying, on average, about 28% of the premium. Simon Lazarus, senior counsel for the Constitutional Accountability Center, said prior to the hearing that a verdict in favor of the plaintiff would mean up to 87% of the population will not be able to afford insurance, essentially making exchanges inoperable and putting the entire system into a “death spiral.” Instead, SCOTUS upheld the premium subsidies, avoiding a massive decline in marketplace enrollment and a “let loose” of unaffordable premiums and maintaining the current US population’s access to affordable insurance.
Without the subsidies, the employer mandate would have become moot, as fines for employers are only triggered by workers obtaining a subsidy through the marketplace.
Because of this, many employers between 50 and 100 Full Time Equivalents were waiting for the SCOTUS verdict before moving forward with plans for compliance in 2016.
With another case behind us ruling in favor of the ACA, President Obama’s statement that “The Affordable Care Act is here to stay,” seems to ring true. Therefore, employers will need to move quickly during the remainder of 2015 to get compliant and prepared for the requirements of the ACA’s employer mandate.
Critical items for Employers to consider include:
- Employer Shared Responsibility to offer insurance
- Affordability of plan offerings
- Health plan design
- Reporting requirements
- The upcoming Cadillac tax
- Ability to demonstrate compliance
Had the ACA been struck down by the Supreme Court last week, governors in the more than 30 states without state exchanges would have faced hard choices to address healthcare coverage for their constituents. While there were many different predictions on how congress and the individual states would respond to such a momentous decision, that all went by the wayside with the ruling to uphold subsidies.
With this final decision by the Supreme Court behind us, the focus in the healthcare industry will likely move from finding a way to repeal the law to finding a way to improve it. Janet Trautwein, CEO of the National Association of Health Underwriters says, “Since the continuity of subsidies in all exchanges is no longer in question, it is our hope that legislation to make health reform more workable for both individual and business consumers of health insurance will now be able to gain traction and move forward in Congress.”